Efficiency of process

The German court system is considered efficient in terms of both cost and time.

Time-efficiency of German litigation is evidenced by statistics: first instance proceedings take, on average, five to 10 months. Appellate proceedings have average durations of seven to 10 months. Therefore, first and second instance proceedings are, on average, concluded after 12 to 20 months. Of course, litigation may take considerably longer in some cases, especially in cases of complex international litigation.

A contributor to the rather quick proceedings is that German law does not, in principle, recognise any form of disclosure or discovery. Any dispute is decided upon carefully balanced rules of evidence as well as the facts presented and evidence produced by the parties. The rules of evidence say, in principle, that each party bears the burden of proof for any facts necessary to establish their case or their defence. The burden of proof may shift to the other party if a document necessary to establish the case or defence is in the possession of that other party or where certain internal knowledge of that other party is relevant.

Germany’s civil procedural rules aim at resolving the dispute, rather than finding out the “truth”. That said, German courts do not distinguish between “true” and “wrong” facts but between “undisputed” and “disputed” facts. Facts that are presented unanimously by both parties or presented by either party and not contested by the other part are considered “undisputed”. Facts presented by either party and challenged by the other party are considered “disputed” facts. This principle is supplemented by each party’s obligation to tell the truth. Thus, the defendant must not challenge facts presented by the claimant if the defendant knows that that fact is true and challenging it would be wrong. German civil courts do not, in principle, take evidence on undisputed facts, even if they were not “true”. Taking of evidence is limited to disputed facts that are legally relevant for the case at hand.

German courts actively manage, supervise and expedite litigation to avoid overly und unreasonably long proceedings. To do so, German courts have several means and approaches. First, the court sets deadlines for written submissions. Missing those deadlines can result in submissions being disregarded and the case being lost. Second, the court presents its (preliminary) view on the case in written advisory opinions and discusses its view with the parties during the oral hearing. Consequently, the parties can focus on any subsequent submissions and offer evidence on the issues pointed out by the court. This avoids lengthy submissions which raise any point that the parties deem relevant but the court does not. Third, the oral hearing is led by the presiding judge and focuses on relevant facts and questions of law. The parties can present their views and discuss them with the court but there are no (lengthy) pleas or monologues from lawyers. Taking of evidence is also led by the court. For instance, witnesses are examined thoroughly and directly by the court. After that, both party’s lawyers may ask additional questions to the witness but without a full-scale cross-examination. Fourth, German courts try, at any stage of the litigation, to find an amicable settlement. Given that the court guides the parties with its views on the factual and legal issues of the case, the court enables the parties to assess if they want to continue the proceedings or if a settlement is preferable in light of an unclear outcome, e.g. because it is unclear what a witness may say. A settlement concluded before the court is directly enforceable like a final and binding judgment.

Another means ensuring that the defendant does not obstruct the proceedings by not responding is a default judgment. Courts can issue a default judgment if a defendant fails to notify the court about their intention to defend against the claim or if a party does not appear or plead at the oral hearing. Although default judgments are subject to appeal, they can be enforced immediately even if an appeal is pending.

Apart from means available to the court, the claimant may choose special forms of fast-track litigation. If a payment claim is (likely) undisputed, the claimant may apply for a payment order. The payment order procedure is quicker and cheaper than ordinary litigation because it is fully automatised and handled electronically. If the defendant does not object the payment order within two weeks, the claimant gets an enforceable payment order which has the same effect as a default judgment. In case of objections against the payment order or the enforceable payment order, the case will be referred to the competent court of first instance and continued as ordinary litigation. If the claimant and defendant are EU citizens or entities in different EU Member States (except for Denmark), the claimant may also apply for a European payment order which is enforceable in the defendant’s country.

Another form of fast-track litigation is available for payment and certain delivery claims which can be established by documentary evidence. In such proceedings, both claimant and defendant may present documentary evidence only to establish their case or defence. Other forms of evidence, in particular, witness or expert evidence, is not available. If the defendant cannot challenge the claim without hearing a witness or an expert, the court will issue a preliminary (but enforceable) judgment and hear the defendant’s witness or expert in a second stage of the proceedings. In case the defendant is successful, the court issues a final judgment, setting aside the preliminary judgment and dismissing the claim.

A current project of the German judiciary to enhance efficiency of litigation is the introduction of electronic case filing and handling. The full implementation is expected to be completed by 2022.

The latest project of the German legislator and the courts is to improve efficiency of cross-border disputes and foster access of international businesses to German courts by introducing English as the court language. Since 2010, courts in Cologne, Bonn and Aachen and, since January 2018, the court in Frankfurt offer to conduct oral hearings in English if agreed by all parties. However, any written submission, the judgment and appellate proceedings are still in German. The German Ministry of Justice also publishes English translations of many German statutes on its website https://www.gesetze-im-internet.de/Teilliste_ translations.html. Most important translations available include the German Civil Code, Code of Civil Procedure, Commercial Code, Insolvency Act or the Act on Limited Liability Companies.

Integrity of process

The German court system is recognised internationally for its integrity.

The German judiciary relies on rules and codes that have been effective for almost 140 years and that have proven to provide independent, fair and efficient litigation at fair and predictable costs. Those rules and codes have been amended from time to time to reflect technical, social, commercial or legal developments.

German courts are bound by the German constitution, the Charter of Fundamental Rights of the European Union and the European Convention of Human Rights. These rules enshrine certain judicial rights every individual or legal entity enjoys. The most important rights are the right of access to the justice system, the right of a fair trial and the right to be heard in court.

The World Justice Project’s Rule of Law Index 2019 ranks Germany – as in previous years – six out of 126 countries, behind Scandinavian countries and the Netherlands. In terms of civil justice, Germany ranks three globally, but also three out of 24 European countries and three out of 38 high-income countries. This puts Germany ahead of commonly favoured jurisdictions such as the United States and the United Kingdom. The adherence to the rule of law ensures integrity, accountability and respect for fundamental rights.

Litigants in Germany can rely on independence of the judiciary because German judges are appointed for life and cannot be instructed to decide in a certain way. Judges are only bound by the law.

The five basic principles of German civil court proceedings, which any judge has to observe and which litigants can rely on, are:

Principle of disposition: (only) the parties decide on the beginning, subject matter and end of litigation. Scope and duration of any litigation in Germany is fully dependent on the parties’ decisions.

Principle of production: the parties have to present all their facts and produce their evidence to establish their claim or defence. The court may only rely on facts and evidence as presented.

Principle of oral hearing: save for urgent interim relief, a judgment may only be issued after an oral hearing.

Principle of directness: the oral hearing and taking of evidence have to be conducted before the judge(s) issuing the judgment.

Principle of publicity: the oral hearing and announcement of the judgment are public and may be attended by anyone. Many court decisions are also published online although sensitive data like names of the parties are redacted before.

In addition to these five basic principles, the civil procedural rules clearly set out which court is responsible for the case to decide on and what possibilities of appeal are available against such decision.

In a nutshell, the German court system for civil litigation is three-tiered. In general, any court decision is subject to two rounds of appeal to a higher court. The first round of appeal can be based on correcting facts and questions of law, whereas the second round of appeal is limited to questions of law. The court of first instance (i.e. the court where the action has to be filed) depends on the amount in dispute: smaller claims with an amount in dispute of EUR 5,000 or less have to be filed with a Local Court (Amtsgericht). Larger claims with an amount in dispute exceeding EUR 5,000 have to be filed with a Regional Court (Landgericht). Local Court decisions can be appealed to Regional Courts. Regional Court decisions can be appealed to the Higher Regional Court (Oberlandesgericht). Appellate decisions of both Regional Courts and Higher Regional Courts can be further appealed to the Federal Court of Justice (Bundesgerichtshof).

German courts are organised decentrally. Regional Courts are available in larger cities, Local Courts also in smaller cities. As a general principle under German civil procedural rules, litigation has to be initiated before a court in whose district the defendant has the place of residency. Exceptions are available, especially for corporate, lease and tort disputes. For instance, claims based on tort may be brought before a court in whose district the damaging event occurred or the damage has been incurred, irrespective of the defendant’s place of residency. It is also possible to agree submitting disputes to courts at a certain venue if the parties to such an agreement are businesses, not consumers. Venue or jurisdiction clauses in large contracts often submit disputes to the courts at financial centres and hubs, such as Frankfurt, Munich or Dusseldorf. These courts have particular expertise and also capacities to deal with complex litigation.

Privilege and disclosure

Until the recent implementation of the European Directive on Antitrust Damages Actions, German law had not recognised disclosure or discovery. Under the directive, which was transposed into German law, both claimants and defendants of antitrust follow-on damage claims may seek disclosure of evidence necessary for their case or their defence. Disclosure may be sought from the other party but also from third parties. It remains to be seen how and to what extent courts will give effect to this – from a German perspective – new legislation.

Apart from disclosure for follow-on damage claims which was introduced by mandatory EU law, German law does not provide for disclosure or discovery proceedings. However, it should be noted that German courts may consider evidence obtained abroad by way of discovery or disclosure. In recent years, few litigants tried to obtain discovery in the United States under 28 U.S.C. § 1782 (assistance to foreign and international tribunals and to litigants before such tribunals) to collect evidence for use in German litigation, in particular in connection with IP infringements.

German law guarantees the attorney-client privilege. Lawyers are legally bound by confidentiality obligations. A lawyer disclosing confidential client information may commit a criminal offence.

Since German law does not recognise disclosure or discovery proceedings, the attorney-client privilege does not play a significant role in civil litigation. Litigants cannot be compelled to disclose attorney work products to the opponent party. If a lawyer is called as a witness, he or she has the right to refuse giving testimony unless the client accepts.

The attorney-client privilege is more important in criminal proceedings and investigations. However, in connection with the public prosecutor’s seizure of client-related information and documents at the German offices of a US law firm advising Volkswagen in the diesel scandal, the German Constitutional Court ruled that neither the (foreign) law firm nor their (German) lawyers can invoke privilege and that Volkswagen’s constitutional rights, in particular the right of a fair trial, were not affected.

Evidence

The German Code of Civil Procedure recognises five types of evidence: witness; expert; documents/records (originals of signed documents); visual inspection; and examination of a party. In addition, the court is free to take into account other documents (e.g. printout of emails) and other information submitted by the parties or, to a limited extent, which are considered public knowledge. With respect to the quantum of a damage claim, the court may, at its discretion and conviction and based on its evaluation of all circumstances, either estimate the amount on its own or order an expert report. In particular, in cases where the court is convinced that the claimant incurred damages but the quantum is in dispute and the claimant struggles to determine the exact amount, the court can estimate that amount.

Each party may present their own experts and reports prepared by these experts. However, whilst these party-appointed experts do qualify as evidence, any reports prepared by these experts are merely additional documents and information that the court will take into account. Only experts appointed by the court count as evidence in the meaning of the procedural rules.

A court takes evidence (only) to establish facts which are (i) in dispute between the parties, and (ii) are relevant for the outcome. This is in order to establish which facts have to be clarified by taking evidence and who bears the burden of proof for that fact.

As part of the court’s steering and supervision of the proceedings, the court will request the parties to present all relevant facts of their case or defence and potential evidence to the extent possible. The court will then issue orders on the taking of evidence. These orders specify which evidence will be examined to establish which particular fact – and which party may have to pay for corresponding expenses depending on the burden of proof.

Taking evidence is always part of the oral hearing so that parties can, and have to, attend. As a general rule, all evidence is taken by the court, meaning that witnesses or experts will be questioned by the judges. Only thereafter may the parties and their lawyers ask additional questions.

Costs

Under Germany’s civil procedural rules, the losing party has to bear all costs, i.e. lawyers’ fees of the succeeding party or parties and court fees. If the claimant succeeds only partially, costs will be split in accordance with the success ratio.

One of the big advantages of German litigation is that the cost risk is predictable. Calculation of reimbursable lawyers’ and court fees is regulated by law. Fees are dependent on the amount in dispute: the higher the amount in dispute, the higher the fees. However, fees rise degressively, i.e. if the amount in dispute is doubled, the fees are less than double. To avoid excessive costs, calculation of fees is capped at an amount in dispute of EUR 30 million per claimant, even if several claims are pursued in a single action or if the defendant files a counter action. Therefore, litigation (action plus counter action, if any) with an actual amount in dispute of EUR 500 million causes the same fees as litigation with an amount in dispute of EUR 30 million. The cap for the amount in dispute may rise to EUR 100 million in exceptional cases where one law firm represents more than one party but the claims pursued by or against these parties are different.

As an example: an action with one claimant and one defendant and with an amount in dispute of EUR 500,000 will result in court fees (first instance only) of some EUR 10,500 and lawyers’ fees of some EUR 9,500. That means that, if the case is lost, the losing party would have to pay some EUR 20,000 to the court and the winning party, and also bear its own lawyers’ fees. If their own lawyer charges statutory rates, the total costs exposure for first instance proceedings would amount to EUR 29,500. Another example: if the amount in dispute was EUR 10 million, court fees (first instance only) would be EUR 113,000 and lawyers’ fees EUR 94,000 per party. The total cost exposure for first instance proceedings would thus be EUR 301,000 (if their own lawyer charges statutory fees).

Bigger law firms do not usually charge statutory fees but an hourly rate. In those cases, actual lawyers’ fees may exceed the statutory fees. However, the winning party may request reimbursement of statutory fees only and has to bear any excess. The losing party must always bear its own lawyers’ fees, irrespective of whether the lawyer charges statutory fees or on an hourly basis. If the judgment of the court of first instance is overturned by the appellate court, the winning party may request reimbursement of its lawyers’ fees for both court instances.

Fee arrangements other than statutory fees or hourly rate are allowed only in exceptional cases. Therefore, especially in international commercial litigation, German lawyers may not enter into any success fee, contingency fee or damages-based agreement.

Litigation funding

Litigation funding is available from legal protection insurance, as well as national or international litigation investment firms. Funding through those litigation investment firms becomes more and more popular in Germany. Litigation funders request, on average, 30–35% of the sums awarded as compensation.

An advantage of commercial litigation funding is that the strict limitations to fee arrangements between lawyers and clients do not apply. Therefore, litigation funders are allowed to enter into, e.g. success fee or damages-based agreements.

Litigation funding support is also available from the court itself if the claimant or defendant has insufficient funds and/or personal income to pay for their own legal costs. Such funding support is even available to companies if both the company and its beneficial owners lack sufficient funds. The second main prerequisite for such court funding support is that the claim or defence has sufficient prospects.

Class actions

German law does not provide for a general class action regime like in the US and other jurisdictions. However, the German legislator has introduced so-called model proceedings in certain areas of law. These model proceedings can be considered a “light version” of class actions.

The first model proceeding was introduced in 2005 already in connection with the IPO of Deutsche Telekom. This model proceeding is to support shareholders and investors claiming damages over false, misleading or omitted public capital markets information, in particular false statements in IPO or sales prospectuses, capital investment fact sheets, financial statements or annual reports. The competent court to hear the model proceedings is the Higher Regional Court (i.e. the appellate court). The court issues a declaratory judgment, which rules on questions of facts and law which apply uniformly to at least 10 individual claims for damages. The process to establish a model case is as follows: each shareholder or investor claiming damages has to pursue their claims in individual litigation before the German courts. One of these litigations becomes the model case to be referred to the Higher Regional Court to decide on the issues that apply to all of these individual litigations, e.g. an error in the listing prospectus. All individual litigations are suspended as long as the model case is pending. After the model case decision becomes final and binding, it will be binding on all other courts. The individual litigations then continue to determine individual factors such as quantum.

The second model proceeding came into force at the end of 2018 only and was pressed through parliament, in particular, to help consumers with damage claims against Volkswagen in connection with the diesel scandal, before claims became time-barred at the end of 2018. Under this new law, called the Act on Model Declaratory Proceedings, qualified institutions protecting consumer rights can start a model proceeding against a consumer-facing business. Consumers intending to benefit from the model proceeding have to enrol in the model proceedings register. The competent court is, again, the Higher Regional Court. The court will decide on questions of facts and laws which apply to all consumers uniformly. After the final conclusion of the model proceeding, all consumers have to commence individual litigation to pursue their damage claims. The questions of facts and laws decided in the model proceeding will then be binding for these individual litigations.

Interim relief

German courts provide interim relief in urgent cases. Interim relief is granted by the court which would be competent to hear the case in main proceedings.

The most important means of interim relief include asset freezes and preliminary injunctions.

An asset freeze is possible if there is reason to believe that a later judgment may not be fully enforced, e.g. because the defendant is about to move all their assets abroad. An asset freeze may also be granted if the judgment would have to be enforced in a foreign jurisdiction that has no arrangement for reciprocity. It is in the court’s discretion to grant the asset freeze directly upon application or only after an oral hearing. The court may also ask the applicant to provide security for potential disadvantages of the opponent.

Preliminary injunctions are available either to safeguard individual legal rights or to have a preliminary ruling on a disputed legal relationship until a judgment is issued. For example, in a preliminary injunction, the court may deprive the opponent temporarily of property to safeguard a claim for handing over such property. Another example is that the court may order that a contract must be temporarily fulfilled until the court issues a judgment about validity of the termination of that contract. The court may decide upon the injunction with or without prior hearing of the opponent. Depending on the urgency and complexity of the case, preliminary injunctions may be issued on the same day.

Given the urgent and preliminary nature of asset freezes and injunctions, the rules of evidence in preliminary proceedings are less strict than in the main proceedings ending with a judgment. Therefore, facts may not only be established by documents, witnesses or experts but also by affidavits.

Decisions to grant or not to grant interim relief are fully subject to appeal by the losing party.

Asset freezes and preliminary injunctions are immediately enforceable. Enforcement has to commence within one month. If this one-month period is exceeded, asset freezes and preliminary injunctions become unenforceable. If the court held that enforcement is subject to provision of security (usually a bank guarantee), such security has to be paid before enforcement can be commenced. Further, the enforcing party is strictly liable for damages caused to the party against which the asset freeze or injunction is enforced if the asset freeze or injunction is lifted upon appeal or if the enforcing party does not prevail in the main proceedings.

Enforcement of judgments/awards

Enforcement of judgments and other enforceable awards is done by bailiffs and the court of first instance. Bailiffs are responsible to seize movable assets including cash. The court is responsible to enforce the seizure of immovable assets including bank accounts and real estate.

Judgments issued by German courts are immediately enforceable, even before they have become final and binding and also even if an appeal has been filed. Such immediate enforcement is subject to provision of security (in particular, a bank guarantee). If the enforced judgment is overturned in appellate proceedings, the enforcing party has to repay collected money and is strictly liable for any damage caused to the other party.

Judgments issued by courts of a Member State of the European Union are directly enforceable under the EU Brussels I Regulation (recast). Under this regulation, which has been incorporated into the German civil procedural rules, a judgment given and enforceable in an EU Member State shall be enforced in another EU Member State without any declaration of enforceability being required. The party against which the judgment from another EU Member State is enforced has only limited defence arguments, e.g. that enforcement violates the orde public or that the foreign judgment was obtained in violation of the right to be heard.

Some non-EU countries entered into bilateral agreements with Germany providing for either direct enforcement of judgments from those countries or simplified enforcement proceedings.

However, there are still a considerable number of countries without any bilateral agreement, including the United States, Canada, South Africa, Asian countries and non-EU Eastern European countries. Enforcement of judgments from those countries requires an exequatur, i.e. a judgment of the court of first instance that that the decision issued by the foreign judicial body is enforceable in Germany. The defendant of an exequatur procedure, i.e. the party against which the foreign judgment is to be enforced, can raise several objections, e.g. that the courts of the state to which the foreign court belongs do not have jurisdiction according to German law, or that the foreign proceedings violated the right to be heard or that reciprocity has not been granted.

The enforcement of arbitral awards requires an enforcement order issued by a Higher Regional Court (i.e. the appellate courts). The competence of the Higher Regional Court as the court of first instance avoids extensive appellate proceedings and thus accelerates enforcement. The enforcement order is required for both domestic and foreign arbitral awards. Most arbitral awards are enforced by German courts.

Cross-border litigation

Both under EU law and international treaties, Germany actively supports cross-border litigation, in particular, service of documents and taking of evidence.

As a Member State of the EU, Germany is subject to European regulations governing cross-border litigation in the EU. The most important regulations are: (i) the EU regulation on the service of judicial and extrajudicial documents in civil or commercial matters providing for service of foreign court documents in Germany and German court documents in other EU Member States; (ii) the EU regulation on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters providing for taking evidence abroad, such as witness examination by a foreign court; (iii) EU regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast Brussels Regulation); and (iv) the EU regulations on the applicable law to contractual and non-contractual obligations (Rome I and Rome II Regulation).

Germany also signed several international treaties, such as (i) the Hague Service Convention providing for a simplified service of foreign judicial and extrajudicial documents in civil or commercial matters, (ii) the Hague Evidence Convention providing for taking of evidence abroad in civil or commercial matters, and (iii) the Hague Choice of Court Convention providing for recognition of exclusive choice of court agreements between parties on civil law issues.

Enforcement of foreign asset freezing orders in Germany is rarely used. Enforcement of asset freezing orders issued in an EU Member State takes considerably longer than enforcing an asset freeze issued by a German court. In particular, before accepting enforcement of foreign orders, the person against whom enforcement is sought will be heard. The person against whom enforcement is sought may also file an application for refusal of enforcement.

Enforcement of asset freezing orders issued by a non-EU court is possible only if such order has the same legal quality as a final and binding judgment rather than the quality of an interim relief measure. And even if such order has the same legal quality as a judgment, enforcement requires exequatur proceedings. As a result, the assets to be frozen may be gone before the foreign asset freezing order becomes enforceable.

German law does not acknowledge asset tracing claims, i.e. there is basically no claim for information on available assets of a person or entity. However, if enforcement against a person or company residing in Germany is not successful and the bailiff cannot seize any movable assets, the bailiff may request the debtor or legal representative of the debtor to provide a full overview of assets and liabilities.

International arbitration

Germany is a very arbitration-friendly jurisdiction. Use of arbitration as a dispute-resolution mechanism has a long-standing tradition. In most areas of business and commerce, institutional and ad hoc arbitration is commonly and successfully used. German courts give full effect to arbitration clauses.

German arbitration law is part of the German Code of Civil Procedure and based on the UNCITRAL Model Law on International Commercial Arbitration of 1985. Therefore, users will find it particularly easy and predictable to apply.

Germany is a signatory state of the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 (New York Convention). Recognition and enforcement of foreign arbitral awards is governed by the New York Convention.

Upon application, German courts look into certain arbitration-related matters, such as appointment and challenge of arbitrators, setting aside and enforcement of (foreign) awards, orders for interim measures, or declaring arbitration proceedings admissible. Any arbitration-related matters are decided upon by Higher Regional Courts (appellate courts). This ensures usually consistent, quick and arbitration-friendly decisions. Court decisions can be appealed to the German Federal Court of Justice, though only based on violation of laws, not facts.

The most well-known arbitration institution in Germany is the German Arbitration Institute (Deutsche Institution für Schiedsgerichtsbarkeit – DIS). The DIS administers national and international arbitration proceedings under the DIS arbitration rules of 2018. Unlike other international arbitration institutions, the new 2018 rules include “Supplementary Rules for Expedited Proceedings”.

Further to the DIS, there are a number of industry-focused arbitration institutions in Germany, e.g. German Maritime Arbitration Association (GMAA) or arbitration institutions with stock and commodity exchanges. The Chinese European Arbitration Centre (CEAC) administers international Asia-related arbitration proceedings.

Mediation and ADR

German law encourages parties to settle their disputes out of court. Most important ADR proceedings in Germany are conciliation, mediation and expert determination. All forms of ADR aim at providing a cost- and time-efficient, mutual solution. Another benefit of out-of-court negotiations over the existence of a claim is that the limitation is suspended from the beginning and beyond the end of such negotiations.

Conciliation is available from governmental conciliation bodies, as well as private conciliators. A conciliator tries to find a mutual settlement together with the parties in confidential meetings. If no such settlement can be reached, the conciliator will issue a non-binding decision.

Mediation is defined as a confidential and structured process in which the parties strive, on a voluntary basis and autonomously, to achieve an amicable resolution of their conflict with the assistance of one or more mediators. The German mediation rules are based on the EU Mediation Directive to support settlement of civil and commercial cross-border disputes out of court. The German Arbitration Institute also enacted the DIS Mediation Rules in 2010. The mediator is an independent and impartial person without any decision-making power who guides the parties through the mediation. Persons who are specially trained in negotiation and communication techniques and conflict competence can become a certified mediator. Any settlement concluded in mediation proceedings is non-binding.

Expert determination is based on an agreement between the parties that any dispute about factual or legal questions needs to be evaluated by an independent expert. Like conciliation and mediation, expert determination proceedings are confidential. The parties may agree that the expert determination is binding or non-binding on them. However, if the expert determination is not honoured by either party, subsequent litigation or arbitration is required to enforce the underlying claim.

In Germany, multi-step dispute resolution clauses are becoming more and more popular. For instance, the parties may agree to first mediate any dispute and, if that is not successful, to initiate litigation or arbitration. The wording of such multi-step dispute resolution clauses needs to be carefully drafted in order to avoid a later dispute as to when arbitration or litigation proceedings are admissible. Also, if multi-step dispute resolution clauses are introduced in general terms and conditions, they may be found invalid by a court if they effectively deprive the other party of the opportunity to pursue their claims properly.

If the parties wish to enforce a settlement agreement that has been entered into after out-of-court negotiations, they can sign an enforceable deed in front of a German notary. Notary fees are usually lower than court fees. The notarial deed can be enforced like a final and binding judgment.

Regulatory investigations

Germany has several federal agencies that have authority to conduct regulatory investigations within their jurisdiction. Those German agencies are, in some fields of law, complemented by European agencies with equal powers. The most important German agencies include the Federal Cartel Office to supervise competition, the Federal Financial Supervisory Authority and the Federal Network Agency supervising electricity, gas, telecommunications, post and railway.

Regulators’ powers include requesting production of documents, hearing witnesses and, most of all, conducting (dawn) raids both at business premises and private residences.

Regulatory investigations are usually confidential until a final decision is issued. Then, regulators often publish press releases summarising their investigation and its outcome. However, if an investigation starts with comprehensive (dawn) raids, this may attract media attention.

If an infringement is found, regulators can impose substantial fines on businesses and individuals.

Actions taken by and orders from regulators are subject to review by the courts. If a regulator’s decision is appealed to the courts, the court will review both the verdict and the fine and apply its own discretion. Thus, the court may lift or uphold the regulator’s decision and/or decrease or increase the imposed fine.

The content of this website is for general information purposes only and does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained herein. This material is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.
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